That Credit "Crunch"

[Mavdog]

we can certainly agree that the tightening of credit standards is in reality a good change for our banks and other lenders to follow.

that is not however what "the credit crunch' truly is about.

previous to the feds efforts to lubricate the flow of debt, there was a paralysis in the markets. commercial paper was very difficult to sell with the volume decrasing by over 80%, an almost $400 B decline if I recall correctly.

that constriction had no basis in creditworthiness, it had to do with a general paralysis on the flow of money, a lack of understanding of what risk there was.

now, due to the efforts by the fed, there is somewhat of a fluid market of funds, and a better capability to gauge risk and allowing for capable borrowers to obtain money from lenders.

nothing wrong with that.

[alexamenos]

Originally Posted by Mavdog

previous to the feds efforts to lubricate the flow of debt, there was a paralysis in the markets.

That's not the conclusion of the linked article (and report upon which the article was based)....more like:

the U.S. and other governments may be throwing good money after bad for want of a better idea of what is really happening. "Just like a doctor contemplating an obviously sick and suffering patient, a massive surgical intervention based on a misdiagnosis can only worsen the patient's condition."

I think they (federalis) mistook the market's liquidation of bad debt for "paralysis", and now we're gonna be the ones in dire need of lubrication.